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Fintech Q&A with Farooq Abbasi of Mosaic Ventures

Fintech Trends · 10/08/16 14:51 · Elena Zozulya

We’ve caught up with Farooq Abbasi, Associate Partner with Mosaic Ventures, a new London-based venture capital firm focused on Series A investments. With a handful of those in fintech - ranging from blockchain technology (Blockchain and Blockstream) to insurance (Guevara) and mortgage broking (Habito) - we sat down with Farooq to talk about the outlook, the implications of Brexit for fintech startups, and what Mosaic looks for in founders?

Can you tell us a bit of a background story of how you got into venture capital and started investing in the fintech space?

I was fortunate to have exposure to entrepreneurship, venture capital and technology from an early age. From a family of physicians, instead of following in their footsteps, my oldest sister had struck out to start her own business. She co-founded and grew a startup to several thousand employees worldwide, and eventually went public. Inspired by a success story so close to me, I sought out and secured an internship with General Catalyst, a leading venture capital firm in Silicon Valley, to begin my business education.

After university I joined Sandbox Industries, a tech incubator and corporate venture capital fund focused on healthcare, and my career since has been working in VC to help brave entrepreneurs bring their ideas to market.

Fintech is fascinating because it's a massive industry which has only just started to see software and data-driven innovation - credit card and payment systems have barely changed in decades, for example. It's the same players with the same brands for decades, making big profits, from lenders to payment processors.

We see a lot of room for automation on origination, servicing, risk scoring, etc. This, of course, presents an opportunity for startups to take market share and provide savings to end customers, and to simply do a better job. As a financial services company, you no longer need retail locations or an army of salespeople to acquire customers - you can build a fairly priced, useful and easy to use platform with the help of technology. Financial technology touches everyone’s lives and, on a personal level, it’s very fulfilling to be involved in developing products that can have a real impact on daily life.

A company I've backed recently is called Remitly, a person-to-person international money transfer service that has recently raised over $38M. Remittance is a highly competitive sector but also a very big market with no mobile-first market leaders. Another company I worked with when I was at my last firm is Sonovate, which provides supply chain financing directly within a free workflow SaaS tool that continues to do well.

You’ve recently moved to London from the US. What is your take on the European startup ecosystem?

I’ve been investing in European startups for a couple years and part of the reason I moved to London to join Mosaic is because I believe in the geography. Europe’s startup ecosystem is on a clear rise: a few big exits from the region prove that something is going on here. It’s also great to see the European mentor network getting better and better. Having access to a network of successful mentors who have exited, invested, and been part of successful entrepreneurial journeys is extremely valuable for any founder, because decisions you make early on are just so important.

In the startup hubs across Europe, we are seeing fewer me-too companies just replicating American success stories. We see companies that have their own identity and can compete globally.  The hubs are somewhat fragmented however - in Germany, we are generally talking about marketplaces and logistics intensive businesses. The Nordics are strong in gaming, design and healthcare. London is a hub for financial technology as well as artificial intelligence. I look forward to other emerging hubs in CEE and Iberian peninsula to develop their strengths and produce large companies both in consumer and enterprise markets.

What implications will Brexit have on the European fintech companies, in your opinion?

It’s largely business as usual for us, but it is a time of uncertainty. Public decision has happened but at this point it’s hard to say what the implications will be. What we do know is that political shifts happen from time to time and we need to adapt. The consensus is negative consequences for startups, especially around hiring international talent and regulatory impact in fintech, for example. I hope negotiations will allow people to freely travel for work and startups to easily expand across Europe. We at Mosaic believe in European entrepreneurship and we are happy to continue supporting ambitious founders from Europe, Israel and the US as usual and go from there.

What are you following right now that you find most interesting in the fintech space?

At Mosaic, we are fanatic about offering hands-on support to entrepreneurs whose startups we invest in. I believe that the best place from which you can help an entrepreneur is when you have thought about the problem thematically for a long time as opposed to being reactive. It’s a really beautiful thing when you arrive at the same hypothesis as an entrepreneur after both being students of a market. This binds you to a really good partnership and as an investor, helps you help startups more efficiently.

This being said, within financial technology, Insurance is an area we are particularly excited about. We’ve made investment in an insurance startup called Guevara that is building a peer-to-peer insurance platform. It enables small groups of people to team up, pool their risk and in turn be incentivized to keep claims low. We are excited about the potential of a peer-to-peer model in insurance that can fuel low-cost customer acquisition and lower churn as well as motivate members to minimise losses.

Another investment we’ve recently made in this area is Nexar, an artificial intelligence dashcam app that assists drivers and helps stay protected on the road. The app records all dangerous events while you’re driving both outside and inside your car. If you get into an accident the app can reproduce the accident. As Nexar is going to have more data about drivers in different cities, they’ll be able to identify who is a good driver and who is a bad driver and provide insights in real-time, potentially warning you as you approach accident-prone situations. Nexar provides a new data stream that has not existed before and opens up great opportunities for insurance purposes.

Computing costs have gotten very low and associated data becoming voluminous. You can easily run big data analytical queries and get meaningful information — whether it’s credit risk, fraud insurance, anything. In insurance for a long time you’ve had people called actuaries doing data science, who’ve been bucketed in some corner of a corporate office isolated with their excel spreadsheets. And now we are arriving in an exciting time where this process is largely driven by software. As there is going to be more data, the provided answers will become better.

Finally, another interesting area for us is wealth management. My colleague Toby Coppel has recently blogged about opportunities and challenges for retirement and pension products, the area within wealth management that hasn’t seen much technological penetration so far.

Can you name a startup in the fintech space we all should know about?

Robinhood, a free stock trading app, is a very interesting company that’s growing like a weed. I am a user of this product and I love it! 

What are you looking for in founders that you invest in, be it in fintech or any other sector?

Venture capital isn’t for everyone. In fact, friends and family and personal savings account for 11x amount of capital in startups as venture capital provides globally. Should you want to go on this journey, being hugely ambitious is very important. We want to invest in people who go for really big outcomes, who are hugely ambitious, hungry and have international aspirations. Also, it’s very important to be articulate competitive difference. There are lots of companies addressing sometimes crowded areas, like fintech, a nomenclature that needs to be broken down and defined better. Being specific is important. We are looking not for me-too companies, but for novel ideas with unique value propositions and radically innovative business models.

 

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